Agency Costs Of Companies Research Articles

Impact of Board Diversity on Agency Costs in the Context of Agency Theory Approach: Evidence From Listed Companies in Sri Lanka

Effective corporate governance leads the way towards aligning the interest between managers and shareholders. Effectiveness of practicing the corporate governance of companies in Sri Lanka is debatable topic due to the variation between standard and actual practices. This study aims to examine the influence of board diversity on agency costs of companies listed in Sri Lanka as proposed by agency theory. The sample of this research consists of all companies listed in Sri Lanka, exclusive of bank and financial institutions which are practicing unique governance practices issued by Central Bank of Sri Lanka. The final sample consists of 180 companies during the period from 2013 to 2019. This study deployed panel regression analysis to test the relationship formulated in the hypotheses by using the EViews 9 software. The results showed that the board diversity-related variables such as separate leadership structure and presence of non-executive director on companies’ board are appeared to have significant influence on agency costs. Meanwhile, board size does not have direct impact on agency costs. The findings of this study regarding board diversity and agency costs have important managerial implications, that these findings are unlikely to the prediction of agency theory and best practices. Agency theory is not applicable to these companies, since the exiting corporate governance practices increase agency costs. The potential benefits of this study led to re-think the board of directors of the companies, managers, shareholder and the policymakers to re-organise the implementation of best practices.

The Relationship Between Social Responsibility and Investment-Cash Flow ‎Sensitivity ‎ and the Role of Agency Costs

In this study, the relationship between social responsibility and investment-cash flow ?sensitivity ?and the role of agency costs in companies listed on Tehran Stock Exchange were investigated. To this end, 127 companies were examined during the period 2011-2016. The required data in this research was extracted, classified and calculated using Excel software and finally, the hypotheses were tested at a 95% confidence level through Eviews? ?and Stata software. The results obtained from hypothesis testing demonstrated that corporate social responsibility ?negatively moderates investment-cash flow ?sensitivity. Furthermore, no reliable evidence was found in relation to the effectiveness of agency costs in the relationship between social responsibility and investment-cash flow ?sensitivity at a 95% confidence level.

Impact of the rights of stockholders, creditors and labor on the agency costs of companies listed in Tehran Stock Exchange

Abstract. The objective of this study is to examine the impact of the rights of shareholders, creditors, and labors as independent variables on the agency costs (corporate debt). To this end, 130 listed companies in the Tehran Stock Exchange from 2008 to 2013 were selected as the sample using elimination method, and the data were analyzed. To achieve the research objectives, 3 hypotheses were formulated and tested. The statistical technique used to test the hypotheses is multivariate regression. The results of statistical analysis of the research hypothesis shows that a the rights of labor, shareholder and creditors (as independent variables) were found to have significant positive correlation with agency costs (as dependent variable) measured by the index of long-term liabilities. According to test results, all three proposed hypotheses were confirmed with a high percentage of confidence.

Studying the Effects of Product Market Competition on Agency Costs of Companies Listed on Tehran Stock Exchange

The present study mainly aims to examine the effects of product market competition on agency costs of companies listed on Tehran Stock Exchange. Thus, this study is going to find an answer to the question whether there is a significant relationship between product market competition and agency costs of listed companies on Tehran Stock Exchange. The population of this research is the companies listed on Tehran Stock Exchange, which 67 of them have been examined, as the statistical sample, in a period from 2004 to 2011. The results of this research indicates that there is a significant inverse relationship between market competition and agency costs scales.

Shareholders Access to Boiler Room Minutes

Some pressure groups propagate that agency costs in companies could be reduced if shareholders would have access to board minutes as the shareholders would have first hand information regarding the affairs of the reporting entity rather than analysing the company through annual reports which tend to be in a standardise format and in summary form. This paper argues that no real tangible benefits would accrue to shareholders as current regulatory instruments provide safeguards for disgruntled shareholders.

The case for a European Competition Disqualification Order

Disqualification of directors for breaches of competition law is not yet on the European agenda. The UK introduced a Competition Disqualification Order (CDO) in 2002. By way of a CDO, a director can be disqualified if his company is in breach of competition law and he is deemed to be unfit to act as director because of his role in the breach. Despite there having been only one reported case in the UK, CDOs have been proved to be an efficient tool in contributing to various policy goals. Empirical data shows that the business community perceives CDOs as an efficient sanction. Input-output data suggests that CDOs have a positive cost/benefit balance. Economic analysis shows that CDOs will reduce overall agency costs in companies. By contrast, adverse effects (over-deterrence) on risk taking represent a potential disadvantage to CDOs. The core design problems of a future CDO will be the binding effect of the cartel investigation on the enterprise, and the connection between corporate governance and competition law. Since neither legislative competence nor human rights issues are hindrances or impediments to a European CDO, the paper suggests that it will be a major step toward the optimal enforcement of competition law.